Will Visa's (V) Solid Payment Volumes Boost Earnings In Q1?

Visa Inc.’s (NYSE:V) first-quarter fiscal 2019 earnings are likely to see a surge in payments volume, the primary driver for Service revenues, which account for one of the main components of the company’s gross revenues.

Service revenues contributed to nearly 33% of the company’s total revenues in fiscal 2018. Notably, service revenues are recognized per the time lag .

This means that the payments volume of one quarter results in service revenues for the next quarter.

With the recent strong holiday sales season expectedly driving the usage of debit and credit cards for making purchase payments, Visa should have seen bloated payments volumes. Total Payments Volumes in the fourth quarter are anticipated to be $2.21 trillion, up 8.9% year over year.

Visa’s payments volumes are generated from six regions — United States, Asia Pacific, Canada, CEMEA, Europe and LAC.

The Zacks Consensus Estimate for the United States, by far the largest of Visa’s six regions, stands at 11.1% expansion in payment volume to $979 billion. Of the same, $528 billion is expected to be driven by credit cards, up 10.4% and $451 billion by debit cards, reflecting a 12.1% rise. Growth in U.S. payments volumes can primarily be attributed to the increasing adoption of Visa Direct, the company’s near real-time payment service for debit cards.

Within Asia-Pacific, Visa might have witnessed higher payment volumes from India as demonetization drive and shift to a cashless society must have led to a frequent usage of debit and credit cards. Business in Thailand is anticipated to gain from the recent launch of Visa’s debit network in the region. Australia is projected to witness impressive payment volume growth, courtesy of the company’s successful portfolio migration through significant long-term exclusive deals inked with the existing clients and its steady growth momentum in both debit and contactless transactions. The Zacks Consensus Estimate for payment volumes in Asia-Pacific is pegged at $499 billion, up 0.8% year over year.

In Europe, payments’ volumes are envisioned to benefit from the Visa Europe acquisitions, completed a couple of years ago. Visa’s efforts to drift debit business to higher-fee credit business in the markets of Italy, Germany and the Nordic countries probably have boosted payments volumes from these regions.

Overall Earnings & Revenue Projections

Notably for Visa, the Zacks Consensus Estimate for earnings of $1.25 indicates a 15.1% increase on a year-over-year basis. However, the consensus estimate for sales of $5.40 billion depicts an 11% improvement from the prior-year quarter’s reported figure.

Click here to know about the other factors that are likely to influence Visa’s overall results.

Our Take

Numerous strategic acquisitions and alliances, technology upgrades and effective marketing have paved the way for long-term growth and a consistent revenue uptick. Visa is well poised to gain from the growing electronic payment processing and a strong international business. Nevertheless, high client incentives, operating expenses and foreign exchange volatility might put pressure on margins.

Visa carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Schedules of Other Players

Mastercard Incorporated (NYSE:MA) , Envestnet, Inc. (NYSE:ENV) and Green Dot Corporation (NYSE:GDOT) are scheduled to release October-December results on Jan 31, Feb 28 and Feb 20, respectively.

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